Kiwibuild off to an early flop

Stuff reported:

Only seven of 10 KiwiBuild homes in Wanaka have sold.

The  development has been controversial – the ballot deadline was extended because only 20 applications had been received.

Now it has been revealed that only seven sales will proceed.

You expect at some stage there might be some under-demand for Kiwibuild houses, but to have it flop at such an early stage is very embarrassing.

Economist Gareth Kiernan said the lack of demand for the properties reflected their price.

“Yes, they’re cheaper than your average house in Wanaka, but still not really in the realms of ‘affordable’ for first-home buyers who have been ‘locked out’ of the housing market. I’m increasingly of the view that high land prices are the primary cause of the housing affordability problem. 

“The government’s approach, to date, of backing the construction of smaller, lower-spec houses makes minimal difference to affordability, because the construction component of the package is not really the issue.”

He said it was more intensive housing developments, reducing the amount of land accompanying each dwelling, that made housing more achievable.

“But [this is] unlikely to be a palatable option to most potential buyers except in Auckland. I’ve seen little evidence that the government knows how to address the land supply issues that have contributed to the surge in house prices.”

Land supply is the key. Get that right and the other issues are minor.